Causes of banking crises: Deregulation, credit booms and asset bubbles, then and now

Saktinil Roy and David Kemme ()

International Review of Economics & Finance, 2012, vol. 24, issue C, 270-294

Abstract: We examine similarities in the run-up to banking crises using two criteria for their predictability: i) the percentage of a specified number of years prior to a crisis correctly called; and ii) the percentage of true alarms of total alarms for a crisis. Using panel logit models we find that a banking crisis will be sparked by the collapse of a real asset bubble. While such bubbles are associated with popular stories of a new era and an increasingly deregulated financial system, in most cases, this would occur even in the absence of sustained surges of capital inflow, accumulation of public debt, low interest rate policies, or structural shocks. We also find that an increase in income inequality inflated the recent housing bubble.

Keywords: Banking crisis; Similarity; Logit (search for similar items in EconPapers)
JEL-codes: C22 C23 E32 E37 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (49)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:24:y:2012:i:c:p:270-294

DOI: 10.1016/j.iref.2012.04.001

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